Wheat prices have been volatile in March but are still well below their 2008 peak, according to a new report from the Food and Agriculture Organization (FAO).

In its first forecast for global wheat production in 2011, the FAO said volume is set to rise 3.4 per cent this year to 676m tonnes – although this level is still below the record harvests of 2008 and 2009. The European Union is the world’s top wheat producing area, and the FAO said in the March edition of its Crop Prospects and Food Situation report that volumes in the region are forecast to increase by 4 per cent in 2011.

It noted that in March the benchmark US wheat price averaged 48 per cent higher than the same period last year but, at USD333 per tonne, was still 40 per cent lower than at its peak in March 2008.

“As the bulk of the world's coarse grains and paddy crops are yet to be planted, it is, however, too early to forecast total cereal production for this year,” it said.

Drought recovery

Higher wheat volumes are likely to be driven by growers in areas recovering from last year’s droughts, particularly in Russia, where volumes are expected to rise 32.5 per cent. Global wheat prices had been rising steadily since August last year, when droughts sparked widespread fires, which devastated Russian wheat crops and led to a self-imposed export ban on wheat from that country.

Kazakhstan was also strongly affected by drought last year, and volumes there are expected to rise 56.2 per cent in 2011.

Moreover, as wheat production was also lower than expected elsewhere, growers have responded to strong prices, boosting the volume forecast for 2011, the FAO said.

According to the report: “Wheat markets came under downward pressure in March following some improvements in weather in the United States and China and reports of possible delays in purchases by some of the countries hit by the recent wave of political unrest. However, prices rebounded sharply during the third week in March.”

The FAO said that wheat production is likely to fall in some regions, however, including in the United States, by 5.8 per cent; mainland China, by 1.8 per cent; Iran, by 9 per cent; and Argentina, by 3.6 per cent.